“Plans for higher energy prices in Europe are not compatible with EU objectives for competitiveness, growth and jobs”

Market Stability Reserve sends contradictory signals from Brussels

“An increase in wholesale power prices of up to 40% on average cannot be the EU’s priority – it is in harsh contradiction with the EU’s objectives for competitiveness, growth, jobs and better regulation and detrimental to the moderate recovery of the European steel industry”, says EUROFER Director General Axel Eggert with regard to current discussions in the European Parliament on the Commission proposal for a Market Stability Reserve (MSR).

“The European steel industry provides the necessary steel products for a low carbon economy. We support an ambitious and effective EU climate policy if it allows us to stay profitable and does not put us at a competitive disadvantage vis-à-vis global competitors.”

The objective of the Commission proposal is to reduce the amount of CO2 allowances in the EU emissions trading market as of 2021. This will increase the CO2 price from about €6 today to at least €30 to €40 by 2030. By this the Commission hopes to trigger earlier investment in carbon leaner technologies such as a switch from coal fired power plants to gas and renewable energies. However, the power sector’s CO2 costs are being passed-through in power prices to industrial and private consumers.

Member States may in principle compensate sectors at risk of carbon leakage up to 80% of those indirect CO2 costs but such compensation is only implemented in very few Member States today. Therefore most plants have to cover 100% of the costs. Furthermore benchmarks are not technically achievable and the “correction factor” as of 2013 is further cutting down free allocation for sectors at risk of carbon leakage in a linear manner. This leads to a shortage of around 28% in 2020 and 50% in 2030 for even the most efficient steel installation in Europe.

Eggert: “Carbon leakage provisions need rapidly to be improved to guarantee that at least at the level of the 10% most efficient installations in sectors at risk of carbon leakage there will be no additional direct and indirect costs resulting from the EU ETS and the Market Stability Reserve, and this in all Member States.”

According to forecasts, the Commission proposal would increase power prices in the EU by up to 8 €/MWh. However, the European Parliament is currently discussing an earlier introduction of the MSR, already in 2017 or 2018, and/or putting immediately 900 million allowances into the MSR, an amount which under current rules would have to be released into the market (“backloaded”) in 2019 and 2020. Projections show that the power price could increase by up to €20/MWh in the period 2018 to 2024 – an increase of up to 40% on average for the EU compared to actual wholesale power prices. “For industries competing globally, such a cost increase will be unaffordable. For private consumers, it will mean a further huge jump in their electricity bill. Such plans should therefore be rejected”, Eggert says.

STEEL MADE IN EUROPE is essential. Steel is 100 percent recyclable, over and over again, without loss of its unique properties – a permanent material for today´s future generations. The EU steel industry plays a vital role in many of Europe´s strategic supply chains. It offers value added products and services developed in close cooperation with its customers to create a stronger, lighter and more sustainable world.

EUROFER, the European Steel Association, represents almost 100 percent of “steel made in EU”, combining a turnover of approximately €166 billion – a share of 1.3 percent in the EU’s GDP. At more than 500 steel production and processing sites in 24 EU member states we provide direct employment for 335 thousand people and indirect employment for millions of European citizens.